Planning the income you’ll need in retirement is about more than just making sure you have enough money—it's also about understanding your lifestyle goals and the kind of retirement you want to experience.
Key messages:
- Planning the income you’ll need in retirement should be driven by your goals and needs.
- By understanding when and where your retirement income will come from, you can plan better to help you keep more of your money.
- Planning for retirement—and managing your finances once retired—is an ongoing process that changes as your goals and needs evolve.
You’ve done it—you’ve worked hard, saved regularly, invested wisely and now you’re ready to enjoy the rewards. Going from work to retirement is a big transition, and while your priorities may shift, the need for a plan remains.
Retirement income is much more than withdrawing funds when you need it—it’s also knowing your goals in retirement, identifying different sources of income available, figuring out tax efficient cash flow, maintaining the right investments and more.
To help you prepare for this next stage in life, this article highlights key considerations when planning your retirement income.
Consideration #1: Define your retirement goals and needs
A good place to start is by estimating your regular living expenses and lifestyle expenses you’ll need in retirement, and any legacy you would like to leave behind. A good estimate of these items will help you determine how much income you will need in retirement and provide the context needed to build your plan.
Consideration #2: Know your income sources
While you work, it’s likely your main source of income is your paycheque. In retirement, your income can come from a variety of different sources. Knowing your income sources and understanding the details of each can help you plan effectively. Creating a smart sequence for withdrawing retirement funds can make your savings last longer, improve tax efficiency, and meet your income needs. Some common sources of retirement income include:
Consideration #3: Manage investments and risk
Just like when you were saving for retirement, your investment approach in retirement should reflect your goal—such as covering income needs and keeping pace with inflation—along with your time horizon and comfort with risk. The key is finding the right mix of growth, stability, income, and flexibility that works for you. Because retirement goals vary, there’s rarely a one-size-fits-all solution.
Diversified investment options like Scotia Portfolio Solutions can help investors meet changing income needs and evolving goals as they transition to and live through retirement.
Consideration #4: Decide when and how to withdraw
Thoughtful cash flow planning can help you draw income from the right source at the right time to support retirement goals and needs—fund your retirement in a tax-efficient manner and keep more of your money working for you.
Does it make sense to collect pension benefits sooner or later? Is there an opportunity to split income with your spouse? What are the tax implications of selling your investments? Should you deplete your RRSP before your TFSA? Will withdrawing from your investments impact your income-tested government benefits? A Scotiabank advisor can help you address these considerations and more by recommending appropriate strategies that reflect your personal circumstances and preferences.
Consideration #5: Keep your plan up to date
Just as they did while you were saving for retirement, things can and will change in retirement, from evolving goals, shifting economic and market conditions, and changes to your personal circumstances. Keeping your plan up to date is something you don’t have to tackle alone—we are here to help. An advisor can help position your portfolio to meet changing retirement income needs over time and adjust your plans regularly to ensure your goals are met.
A Scotiabank advisor can help you define your retirement goals and needs, figure out the different income sources you may have and recommend strategies that make sense for you. Book an appointment today.
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